Global markets are under pressure as investors weigh a slowing growth outlook against expectations that inflation will stay elevated into next year, even after hopes of a de-escalation in the Iran war pushed oil below $100 a barrel this week. Government borrowing costs have climbed sharply this year, European economic data has softened, and the tech-heavy Nasdaq posted its biggest one-day drop since April 2025, according to Reuters.

Why falling oil prices aren't calming markets

Crude has fallen roughly 15% this week, but the starting point matters. Oil is still up about 64% since the start of 2026, and natural gas costs nearly three times what it did in January. Those higher energy costs feed through to transport, manufacturing and household budgets, adding to inflation while also dragging on growth.

Read also Bank of Canada raises interest rate to 2.5% amid oil price concerns

Analysts caution that any resolution to the Iran war is far from certain, leaving room for prices to climb again. The Democratic victory in the US midterm elections has raised hopes for an eventual end to the conflict.

What is keeping inflation expectations high?

The University of Michigan's one-year US inflation expectations measure rose to 4.7% in October from 4.6% in September and 3.4% in February. Market-based long-term expectations remain above 2% in the euro zone and the US, and above 3% in Britain.

Food is another pressure point. The UN Food and Agriculture Organization's Food Price Index sits at its highest level in nearly four years, driven by extreme weather, shipping disruptions and costly energy. Major consumer goods and food companies have warned of further price increases.

AllianceBernstein chief investment strategist Inigo Fraser Jenkins said the supply disruptions behind these pressures will outlast the midterms: "Today it's oil, but next time it could be cobalt, lithium or something else."

What happens next for central banks?

If price pressures persist while growth slows, central banks may face pressure to raise interest rates further. That prospect is already reflected in higher government borrowing costs. Investors will be watching incoming inflation data and any signals on the Iran conflict for signs of relief.

FAQ

How far has oil fallen this week?

Oil dropped about 15% this week to just below $100 a barrel, though it remains up roughly 64% for the year.

Why does food matter for inflation?

The FAO Food Price Index is at its highest in nearly four years, and companies have warned of more increases, keeping overall inflation elevated.